2019 (5) TMI 1576 - AT - Customs

Refund of duties paid in excess - benefit of N/N. 94/96-Cus dated 16th December 1996 - denial of refund on the ground that MODVAT Credit availed - HELD THAT - Appellant had discharged duty liability on re-import as though the goods had been imported for the first time. There can be no doubt that the excess duty collected was required to be dealt with in accordance with section 27 of Customs Act, 1962. N/N. 94/1996-Cus does not impose any condition pertaining to availment of MODVAT credit; indeed, except in certain exemption notifications dealing notably with export promotion schemes, the law relating to customs does not make any reference to MODVAT, or to its successor CENVAT, credit. To the extent that the notification is silent on this aspect, the lower authorities, exercising jurisdiction under Customs Act, 1962 could not have made any reference to, or imposed, any condition not contemplated in the exemption notification. Just as exemption notification are to be strictly construed against the importer so, too, must there be no latitude vested with officers of customs to enforce any condition on whim or according to their wisdom. CENVAT credit is availed on entry of eligible goods in the factory of manufacture. There is no evidence here of such availment and there is mere presumption of availment, and extent, of such credit. Under the relevant rules, credit availed on goods that are not used in the factory should be reversed and in the event of failure to reverse consequences under other specific statutory provisions would arise . That cannot be read into the provisions of Customs Act, 1962 to deny refund of duty paid in excess of that which was to be collected and held to be so by the Tribunal. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Disallowance of refund of duties claimed to be paid in excess due to denial of benefit of notification no. 94/96-Cus dated 16th December 1996 despite eligibility.

Analysis:
The case involved the appeal of M/s Hindusthan National Glass Industries Ltd against the order-in-appeal of the Commissioner of Customs (Appeals) regarding the disallowance of refund of duties claimed to have been paid in excess. The appellant had imported machinery, which was re-exported and re-imported with a claim for the benefit of a specific notification. The assessing authority denied the benefit, leading to the payment of additional duty by the appellant. The Tribunal had earlier dismissed the Revenue's appeal against allowing the benefit to a substantial extent. The appellant then claimed a refund of the excess duty paid, which was partially allowed but later reversed by the competent authority, requiring the appellant to pay a further amount. The issue revolved around the denial of refund based on the availment of MODVAT and the conditions of the notification in question.

The records revealed that the refund claim was rejected due to the importer's alleged availment of MODVAT, which was deemed impermissible. The first appellate authority primarily focused on this aspect to deny the refund. However, it was established that the appellant had initially discharged the duty liability and was entitled to a refund upon re-export, as per the Customs Act, 1962. The Tribunal confirmed that the re-imported goods matched those exported earlier, making the appellant eligible for the exemption under the notification. The excess duty collected was required to be handled in accordance with the Customs Act, 1962.

The notification in question did not impose any conditions related to MODVAT credit, and the law concerning customs did not reference MODVAT or CENVAT credit in this context. Therefore, the lower authorities were not authorized to impose conditions beyond what was specified in the exemption notification. The appellant had not availed CENVAT credit, and the presumption of such availment was unfounded. The rules stipulated that credit on unused goods should be reversed, but this provision did not apply to deny the refund of excess duty under the Customs Act, 1962. The judgment emphasized strict interpretation of exemption notifications against importers and the absence of customs officers' discretion to impose additional conditions.

In conclusion, the impugned order disallowing the refund was set aside, and the appeal was allowed with consequential relief. The judgment highlighted the importance of adhering to the provisions of the Customs Act, 1962 and exemption notifications without introducing extraneous conditions beyond what was explicitly stated.